New VAT rules come into effect from 1 January 2015 for supplies of telecommunications, broadcasting and electronically delivered services (‘BTE’) made to private consumers in the EU (‘B2C’). The changes bring the VAT treatment of supplies to consumers into line with the existing rules for supplies made to businesses (‘B2B’) and are based on where the services are actually consumed.
Currently these services are taxed within the EU based on where the supplier is located and this has resulted in an uneven playing field with suppliers based in low VAT rate jurisdictions at a competitive advantage over suppliers located in EU countries with a higher VAT rate. For example, many large businesses that supply these types of services are VAT registered in Luxembourg where the VAT rate is the lowest in the EU.
From 1 January 2015 however, VAT will be due based on where the customer is located and, since consumers cannot self-account for VAT, suppliers will become liable to account for VAT in every EU country where they make supplies to private consumers.
‘Mini-One-Stop-Shop (MOSS)’
To ease the compliance burden of having to VAT register and submit returns in each relevant EU country, a “Mini One-Stop-Shop” (‘MOSS’) scheme will be introduced. This gives suppliers the option of submitting a single VAT return in one EU Member State (the Member State of Identification) covering the supplies made to consumers in all EU countries along with the associated VAT due.
The Member State of Identification will then be responsible for reallocating the VAT to the tax authorities in each country where the services were consumed.
Businesses affected by these rule changes need to start planning now to ensure that:
- They know their customers – are they business customers or private consumers? – where is the customer located?
- Billing & accounting systems can cope – can they deal with multiple VAT rates? There are 28 EU Member States! – are the VAT rates up to date? – are processes in place to identify and deal with VAT rate changes throughout the EU?
- Prices are amended to reflect the differing VAT rates chargeable – do websites and printed price lists need updating?
- Either the required multiple VAT registrations or a single “Mini One-Stop-Shop” registration is in place
Whilst similar rules are currently in place for Non-EU suppliers of electronically supplied services to EU consumers, along with a one-stop-shop registration option, the extension of these rules to EU suppliers of telecommunications and broadcasting services is likely to lead to increased scrutiny by EU tax authorities.
To date there has been little evidence of much auditing of the non-EU VAT on Electronic Services (‘VOES’) one-stop-shop VAT returns but that could well change in the future. It is therefore going to be increasingly important that non-EU suppliers can demonstrate compliance in this area.
Author: Roger Bevan, RBC VAT
If you would like more information on the EU VAT changes please contact Pete Doyle – p.doyle@nortonsgroup.com
Disclaimer:
This article is intended for general guidance only. It cannot cover every situation and should not be used for decision making without professional advice. The authors accept no responsibility for loss arising from any action taken or not taken by anyone using this publication.
